Tax Management India. Com
                        Law and Practice: A Digital eBook ...

Category of Documents

TMI - Tax Management India. Com
Case Laws Acts Notifications Circulars Classification Forms Manuals SMS News Articles
Highlights
D. Forum
What's New

Share:      

        Home        
 

TMI Blog

Home List
← Previous Next →

2018 (4) TMI 802

hrough a recognised stock exchange viz., MCX stock exchange and was not supported by proper time stamped contract notes and that the transaction did not qualify as an eligible transaction - losses in speculation business - Held that:- The transaction done by the assessee is not a speculative transaction but it only comes under provios (d) to Section 43(5) thereby it is only a non speculative transaction and thus exempt from tax. - Section 73 of the I.T. Act deals with "losses in speculation business". Explanation to Section 73 categorically states that in the case of a company, business of purchase and sale of shares is deemed to be speculative business. - In the instant case, the assessee had suffered loss in trading of derivatives carried through Multi Commodity Stock Exchange. As derivative transactions being separate from trading in shares, provisions of Explanation to Section 73 will not be applicable to such transactions and hence, the loss incurred by the assessee in derivative transactions through recognised stock exchange has to be set off against other business income as per provisions of the Act. - The transaction carried out by the assessee is a non specula .....

X X X X X X X

Full Text of the Document

X X X X X X X

identity number, and that the transaction were to be carried out through recognised stock exchange, and therefore the transaction is an eligible transaction, under Section 43(5). The Commissioner of Income Tax (Appeal), Chennai, held that the derivatives cannot be treated as share and therefore the transaction is excluded from the Explanation to Section 73(4). Thereby, the Commissioner of Income Tax (Appeal), Chennai, has directed the Assessing Officer to delete the above disallowance. 4. Aggrieved by the above said order, the Revenue preferred an appeal in ITA.No.659/Mds/2016, before the Income Tax Appellate Tribunal 'A' Bench, Chennai. Submissions made by the Revenue, before the Income Tax Appellate Tribunal, Chennai, are as follows:- "2. Shri Shiva Srinivas, the learned Departmental Representative, submitted that, the only issue arises, for consideration is with regard to addition of ₹ 60,66,466/-. According to the learned departmental representative, the assessee claimed the sum of ₹ 60,66,466/- as loss in open market trading. According to the Ld. D.R., the assessee traded in Multi Commodity Exchange. The assessee claimed that the transaction is only a .....

X X X X X X X

Full Text of the Document

X X X X X X X

sions of Section 73(4) is not applicable at all." 6. After considering the rival submissions and on the facts and circumstances of the case, the Income Tax Appellate Tribunal 'A' Bench, Chennai, vide order dated 15.09.2016, made in ITA No.659/mds/2016, dismissed the Revenue appeal. 7. Aggrieved by the same, the present Tax Case Appeal has been filed by the Commissioner of Income Tax, Chennai, on the following substantial questions of law: "1. Whether on the facts and in the circumstances of the case and in law, Tribunal was right in not appreciating the fact that the assessee had traded the commodity through Multi Commodity Stock Exchange an un recognised exchange which is a different entity from the MCX Stock Exchange which is a recognised exchange ? 2. Whether on the facts and in the circumstances of the case and in law, Tribunal was right in holding that transactions in commodity derivatives done through Multi Commodity Stock Exchange cannot be treated as speculative transaction as per Section 43(5) ? 3. Whether on the facts and circumstances of the case and in law, Tribunal was right in perversely holding that transaction in derivatives done by assessee cannot .....

X X X X X X X

Full Text of the Document

X X X X X X X

nsactions' as per section 43(5)(d). In view of explanation to section 73, the assessee will not be eligible for set off and carry forward of the loss of ₹ 60,66,466/- irrespective of the fact whether the transactions are covered by the definition of 'eligible transaction'. Penalty proceedings under Section 271(1)(c) are initiated for furnishing inaccurate particulars of income. The assessed income is computed as under: Income from business as admitted : ₹ 22,65,469/- Add: Loss on open market trading :Rs.60,66,466/- Assessed income : ₹ 83,31,935/- Tax as per computation sheet and demand notice enclosed should be paid. 11. According to the Assessing Officer (i) as per Section 45(5)(d) of the Income Tax Act, the transaction carried out by the assessee cannot be considered as 'eligible transaction' and the same has to be treated as 'speculative transaction' and (ii) irrespective of the fact whether the transactions are covered by the definition of 'eligible transaction' and the assessee will not be eligible for set off and carry forward of the loss of ₹ 60,66,466/- in view of Explanation to Section 73 of the Income Tax Act. 12 .....

X X X X X X X

Full Text of the Document

X X X X X X X

(15 of 1992) in accordance with the provisions of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) or the Securities and Exchange Board of India Act, 1992 (15 of 1992) or the Depositories Act, 1996 (22 of 1996) and the rules, regulations or bye-laws made or directions issued under those Acts or by banks or mutual funds on a recognised stock exchange; and (B) which is supported by a time stamped contract note issued by such stock broker or sub-broker or such other intermediary to every client indicating in the contract note the unique client identity number allotted under any Act referred to in sub-clause (A) and permanent account number allotted under this Act; (ii) "recognised stock exchange" means a recognised stock exchange as referred to in clause (f) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and which fulfils such conditions as may be prescribed and notified by the Central Government for this purpose; x x x x x Section 73: Losses in speculative business: (1) Any loss, computed n respect of a speculation business carried on by the assessee, shall not be set off except against profits and gains, if any, of another speculat .....

X X X X X X X

Full Text of the Document

X X X X X X X

the instant case. The assessee's main business is in retail gold jewellery and for a short period of time viz., three months i.e., from 08.08.2010 to 25.10.2010, the assessee was also trading in derivatives through recognised Multi Commodity Stock Exchange and suffered loss to a tune of ₹ 60,66,466/-. The said transactions were carried out by the assessee electronically on screen based systems and through approved stock broker and that the same is supported by Time Stamped Contract Note, issued by the stock broker indicating the unique identification number and PAN number in the contract note. The Authorised Representative of the assessee has explained and furnished the above details during assessment proceedings. However, an adverse assessment order has been preferred. 15. After considering the rival submissions, in the appeal filed by the assessee, the Commissioner of Income Tax (Appeals), vide order dated 16.12.2015, held as follows: "5.1.6. For the transactions in F & O segments to qualify for being non-speculative transactions as per the definitions in Section 43(5) the transactions have to be eligible transactions and the transactions have to be carried ou .....

X X X X X X X

Full Text of the Document

X X X X X X X

Act thereby it is only a non speculative transaction and thus exempt from tax. 18. Section 73 of the I.T. Act deals with "losses in speculation business". Explanation to Section 73 categorically states that in the case of a company, business of purchase and sale of shares is deemed to be speculative business. Here, in the instant case, the assessee had suffered loss in trading of derivatives carried through Multi Commodity Stock Exchange. As derivative transactions being separate from trading in shares, provisions of Explanation to Section 73 will not be applicable to such transactions and hence, the loss incurred by the assessee in derivative transactions through recognised stock exchange has to be set off against other business income as per provisions of the Act. 19. In the light of the above discussions, we are of the view that the transaction carried out by the assessee is a non speculative transaction and thus Section 43(5) is not attracted to the facts of the instant case and likewise the assessee was trading in derivatives and not in shares, so the loss suffered by the assessee in trading in derivatives is excluded from the ambit of Explanation to Section 73. 20. .....

X X X X X X X

Full Text of the Document

X X X X X X X

 

 

← Previous Next →

 

 

|| Home || About us || Feedback || Contact us || Disclaimer || Terms of Use || Privacy Policy || Database || Members || Refer Us ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.
|| Blog || Site Map - Recent || Site Map ||